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CA Final · Direct Tax Laws & International Taxation · Incomes which do not form part of Total Income

Sundaram Auto Components Ltd declared an interim dividend on 20 March 2026. The amount was unconditionally made available to the entitled member Mr Rohan only on 10 April 2026, when it was credited to his account. Under section 7 of the Income-tax Act, 2025, in which tax year is this dividend deemed to be Mr Rohan's income?

It is income of the tax year beginning 1 April 2026. Section 7(2)(b) treats an interim dividend as income of the year in which the amount is unconditionally made available to the member entitled to it, not the year of declaration. Here that was 10 April 2026.

  1. AThe tax year beginning 1 April 2025, being the year of declaration
  2. BThe tax year beginning 1 April 2026, being the year it was unconditionally made availableCorrect
  3. CSpread equally over both tax years
  4. DThe tax year in which the company later holds its annual general meeting

Explanation

Section 7(2)(b) provides that an interim dividend is deemed to be income of the tax year in which the amount is unconditionally made available by the company to the entitled member. This happened on 10 April 2026, which falls in the tax year beginning 1 April 2026. The date of declaration is not the test for an interim dividend, so the earlier year is wrong.

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